Transfering the value from a defined benefit scheme

C

Clodagho

Guest
Hi all,

I had 3.5 years of service in a company with a defined benefit scheme with Mercer. I left there 2 years ago and now Mercer have asked me to transfer my benefits. However they said I am not entitled to my employers contributions as it is DB and not DC scheme. Is this correct?

Also can someone point me in the direction of how to open a PRSA and which hopefully a league of providers?

Thanks,
Clodagh.
 
Clodagho said:
I had 3.5 years of service in a company with a defined benefit scheme with Mercer. I left there 2 years ago and now Mercer have asked me to transfer my benefits. However they said I am not entitled to my employers contributions as it is DB and not DC scheme. Is this correct?
Click to expand...
Have you read some of the many other threads on DB schemes?
Also can someone point me in the direction of how to open a PRSA and which hopefully a league of providers?
Click to expand...
See here for example:

Links and Key Posts on Pensions
The cheapest PRSA?
 
ClubMan said:
Have you read some of the many other threads on DB schemes?
Click to expand...

I've been on the Pensions Board site and can't find an answer to my question. Haven't trawled through this site yet.
 
Clodagho

If ou only left pensionable service 2 years you should be entitled to the value of the employer contributions, the rules in respect of at what stage you are entitled to the employer contributions when you leave service changed for people leaving pensionable service after 1 June 2002.

If you left service between 1 January 1991 and 1 June 2002 you needed a 5 years of service to be legally entitled to any employer contributions to the scheme (the scheme rules could potentially have the right sooner than 5 years).

If you leave service after 1 June 2002 you only need 2 years pensionable service to qualify to take the employer contributions with you.

The fact that it was a DB as opposed to a DC should not have any effect as far as I am aware.
 
murp said:
The fact that it was a DB as opposed to a DC should not have any effect as far as I am aware.
Click to expand...

Thank you for your reply. This is the bit that I am interested in. I cannot find any information eg the Pension Act 2001 etc to either contradict or support the fact that I am entitled to take my company contributions. I left in March 2005. I joined the plan in September 2001 - so this was before the Pensions Act 2001 was effective on January 1st 2002. Maybe the fact that the scheme was started before the Act makes a different.
 
Position here is straightforward.
All withdrawals after 1st June 2002 are only required to have completed 2 years service as a member of the scheme in order to qualify for full preserved benefits. If you were in the scheme (not just an employee) for more than 2 years then you qualify.
I suggest you check the dates and go back to Mercer. The DB or DC issue is irrelevant.
 
In a DB scheme the transfer value is based on length of service in the scheme and salary and age at date of leaving service - the employer contributions are not relevant as there is no specific employer contribution for each member to a DB scheme.
 
CapitalCCC said:
In a DB scheme the transfer value is based on length of service in the scheme and salary and age at date of leaving service - the employer contributions are not relevant as there is no specific employer contribution for each member to a DB scheme.
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I have all my payslips for this period.
It has specific employer and member contributions listed.
If I multiply the member contribution by 12 and by 3.5 (years of service) I have a figure near what they are telling me the value of the plan is.

Surely if I have 3.5 years of service and I leave I should get some contribution from the company?

This is what Mercer said: "A Defined Benefit plan does not work as a Defined contribution plan where you get your own and the company contributions. Your value in a DB plan is based on your salary and your service. "
 
You should get a transfer value based on your deferred pension.

What is the deferred pension that you have from your service in the scheme?

Is it all "preserved"?

It should be if you have more than two years of scheme service and you left after 1 June 2002.

Mercer are correct, you are not entitled to "employer contributions" when you leave a DB scheme, you are entitled to a TRANSFER VALUE and this is based on your deferred pension (usually this TRANSFER VALUE is MUCH bigger than your own contributions) unless you were on a low/very low salary OR you are very young.
 
I paid about €69 a month and employer paid about €122 on average over the 3.5 years

The tranfer value is €2,300 approx or €904 approx per annum afer retirement.
Does that sound right?
It seems like very little to me :-(

I was 21-25 during this period.
 
Would need to get some info from you to estimate the transfer value using an excel spreadsheet.

It would be the following:

Date of Birth
Date of Leaving
Deferred Pension (in today's money terms)
Are pensions fixed or increasing when they commence to be paid
Is there a Spouse Pension payable

The deferred pension of 900 would imply a salary of about 30k.

If you want me to look into it further and dont want to put all that on a public message then send it direct to me.
 
This is one of those situations where BD is not better than DC. Because of your youth, the Transfer Value represents the present value of your 3.5 years service i.e. the present value of your accrued pension which would be payable from 65 (I assume).
It is possible that this may only represent your contributions.
In a DB scheme the Employer is contributing a % of total payroll into the Fund. But it is a single fund, not a seperate fund for each employee. Thus whilst notionally the Employer was paying in x% of your salary into the Fund, it was not being specifically allocated to you.
So typically the Transfer Value is the present value of:
3.5/60 x Salary payable from age 65 (but allowing for indexation up to 65).

Based on you age the Transfer Value seems about right (depends on the actuarial assumptions used).
 
The transfer value for DB schemes are usually poor unless you are close to retirement (5 years or less) - because the assumptions used expect racy future investment returns.

It is often better to leave as a deferred benefit - assuming you think the pension scheme will be solvent when you retire.

This is because if you take the transfer value you would actaully need to achieve the future (Reasonably) racy investment return to achieve the deferred pension on offer!

Plus you can always ask for a new transfer value in the future which might be better than the one on offer now - particularly if transfer value calculation basis was made more realistic
 
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